Below is a very handy Q&A-style guide to the results from Centrica PLC (LSE:CNA), which we found in a note issued earlier by the Swiss investment bank UBS.
Q: How did Centrica's results compare to expectations?
A: Centrica beat expectations with adjusted earnings per share of 34.2p, which was 3p higher than consensus, and had a net cash balance of £1.2bn, which was in line with expectations. The company plans to provide a strategy update in H1 and divisional results can be found on page 2.
Q: What were the key takeaways from Centrica's results?
A: (1) Centrica's trading and upstream divisions had a strong performance, but only slightly better than a previous ad hoc update in January; (2) Downstream results, including a loss at British Gas Services, were weaker than expected; (3) A new £300m buyback scheme was announced, bringing the total to £550m or close to 10% of market cap, the current limit under the company's articles; (4) Net cash was in line with expectations but with a £1.7bn net working capital outflow, which could reverse during 2023; (5) Centrica has £400m of growth capital expenditure underway; (6) The dividend per share was confirmed at 3p; (7) The company emphasized the taxes paid and voluntary support given to retail customers.
Q: Has Centrica's outlook or guidance changed?
A: The company provided qualitative comments for 2023, highlighting the range of uncertainties. The hedging update, if combined with a mark-to-market for unhedged volumes, suggests earnings per share of around 18-19p for 2023, towards the lower end of the recent consensus range.
Q: How are investors expected to react to Centrica's results?
A: It is expected to have a moderately positive impact for several reasons: (i) Centrica beat expectations with a 3p earnings per share beat for 2022, but with limited change to the 2023 outlook; (ii) A new buyback scheme was announced, which was widely anticipated and brings the distribution yield in line with energy peers; (iii) There is potential for working capital reversals to improve the balance sheet in 2023, but downstream looks difficult, commodity prices are falling, and shares are not cheap relative to oil and gas peers; (iv) The pre-pay meter story remains in the media, adding complexity. Overall, it is expected that shares will rise, moving towards a price target of 110p, but the company may soon reach Peak Centrica.